You May Not Have to File a Tax Return, but You Probably Should Anyway

Source: 401kcalculator.org via Flickr.

Millions of Americans are not required to file a tax return every year, but those who don't may be missing out. Too many low-income individuals and people who are claimed as dependents on someone else's return decide not to file, sometimes cheating themselves out of thousands of dollars in potential refunds in the process.

So here's a quick overview of who isn't required to file a tax return in 2015, along with the reasons they may want to do it anyway.

Who doesn't have to file?
If your income is below a certain level, you may not have to file a tax return if you choose not to. For the 2014 tax year, single taxpayers under 65 who earned less than $10,150 and married couples under 65 who earned less than $20,300 may be exempt from the filing requirement, along with dependents who earn less than $6,100.

The limits are slightly higher for those who are over age 65 and those who file as "head of household." And some taxpayers have different limits if they fall into special categories, such as "widowed." For a full list of the income requirements, read this.

Exceptions
Some people are required to file a tax return no matter what their income is. For example, people with unreported tip income are required to file no matter how much they made. And people with more than $400 in self-employment income have to file as well.

Further, anyone who owes a recapture tax -- such as a repayment of the first-time homebuyer credit -- must file a return, as must those who owe alternative minimum taxes, household employment taxes, or additional taxes on a retirement plan.

Why you should file a return anyway
In a nutshell, many people with low incomes qualify for some pretty lucrative credits and deductions. And they may qualify for a refund if any Federal or state taxes were withheld throughout the year.

One important example is the Earned Income Tax Credit, which is a refundable credit for low-income workers, particularly those with children. A "refundable" credit means you can get the money even if you don't owe any income taxes whatsoever. According to the IRS, up to 25% of people who qualify for the EITC don't claim it.

And this can be a big one. For low-income families with three or more children, the credit can be worth up to $6,044. Even with one child, the EITC can be up to $3,250. So, even if you are not required to file a return, the EITC alone can be worth the effort.

There are many other reasons to file. For example, if you are not a dependent and are in college, and you paid tuition in 2014 (even if you paid with student loans), you need to file a return in order to claim the American Opportunity Credit, which can be worth $2,500 per year. Another common credit for low-income Americans is the Child Tax Credit, which can be worth up to $1,000 per child.

And finally, if you had any Federal or state taxes withheld from your paychecks throughout the year, it's probably in your best interest to file a return, as there's an excellent chance you'll qualify for a refund of some or all of the withholdings.

The bottom line
Even if you don't have to file a tax return this year, it's most likely in your best interest to do so anyway. Tax returns for low-income earners are generally less complicated to prepare, and the effort could literally get you thousands of dollars.